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Leonard N. Stern School of Business

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About the course

There are as many models for valuing stocks and businesses as there are analysts performing valuations. The differences between these models are often emphasized by their users, and the common elements are often ignored. The objective of this program is to provide the fundamentals of the different valuation approaches, an understanding of the limitations of each approach, and examples of each of the applications.

Taught by valuation guru Aswath Damodaran, this program will address discounted cash flow valuation and the estimation issues that arise when information is imprecise or unavailable, value enhancement through the prism of discounted cash flow models, and contrast techniques. It will also delve into other valuation approaches, such as the use of multiples and comparables in relative valuation, and the use of option pricing to value certain types of stocks and businesses.

Program Takeaways

  • Multiples – Value a firm using multiples and comparable firms; analyze and critique the use of multiples in valuation
  • Problem Firms – Develop the tools to value "problem" firms, including financially troubled firms and start-up firms
  • Restructuring – Estimate the effect restructuring a firm has on value

Agenda

Day 1

Session 1: The Discounted Cash Flow Model

  • Setting up the model

Session 2: Discounted Cash Flow Valuation

  • The big picture of discounted cash flow (DCF) valuation
  • Valuation examples
  • The discount rate
  • Risk premiums and betas
  • The cost of debt
  • Estimating cash flows

Day 1 Conclusion and Evaluations

Day 2

Session 3: Discounted Cash Flow Valuation (cont.)

  • Estimating growth rates
  • Estimating growth patterns
  • The terminal value
  • Closing thoughts on DCF valuation

Session 4: Loose Ends in Valuation

  • Cash, cross holdings and other assets
  • The value of control, synergy and transparency
  • The liquidity discount
  • Employee stock options

Day 2 Conclusion and Evaluations

Day 3

Session 5: The Allure of Relative Valuation

  • Categorizing multiples
  • The four steps in analyzing multiples
  • Applying multiples in valuation
  • Finding comparable firms
  • Controlling for differences
  • Picking the right multiple

Session 6: The Real Options Story

  • The option to delay (and value patents and natural resource companies)
  • The option to abandon
  • The option to extend
  • Equity in troubled firms as options

Program Conclusion and Evaluations

Who should attend

Although there are no formal education or background requirements, this course is designed for executives who meet the criteria below. While we strongly encourage global participation, please note that all courses are taught in English. Proficiency in written and spoken English is required.

  • Years of Experience – This course is designed for professionals with 7+ years of work experience
  • Job Functions – Professionals who want to examine alternative valuation approaches, understand the effects of corporate restructuring on firm value, and/or gain value enhancement strategies for their firms
  • Prerequisites – Please be prepared to supply a valuation you have performed, or a valuation performed by someone else that you would like to examine

Trust the experts

Aswath Damodaran

Biography Aswath Damodaran holds the Kerschner Family Chair in Finance Education and is Professor of Finance at New York University Stern School of Business. Before coming to Stern, he also lectured in Finance at the University of California, Berkeley. Professor Damodaran received a B.A. in Acc...

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